business essay

Elecdyne is a Japanese small medium enterprise

Published: 23, March 2015

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Introduction

Elecdyne is a Japanese small medium enterprise based in Tokyo, which started business in 1990 with a number of five workers. Over ten years, the growth of the company has increased successfully, staff strength has increased to 100 workers and with the use of technology licensed from a number of multinationals, the company now produces a wide range of electronic products which include televisions, CD players, DVD players, hi-fi equipments, Mp3 players etc.

A brief history into the Japanese economy shows that during the 1980s, the Japanese economy was the envy of the world. GDP per capita had risen from $5,000 in 1960 to $15,000 in 1980, and by 1990 had eclipsed $22,000. Through the leadership of companies like Sony, Japan had become the clear leader in innovation of consumer electronics products and high volume sophisticated electronic assembly. The combination of growing indigenous demand, global consumer electronics product leadership, and many years of investment in manufacturing technology and capacity certainly benefited Japanese electronics producers the 1980s.

The Gross Domestic Product (GDP) in Japan expanded at an annual rate of 3.80 percent in the last quarter. Japan Gross Domestic Product is worth 4909 billion dollars or 7.92% of the world economy, according to the World Bank. Japan's industrialized, free market economy is the second-largest in the world. Its economy is highly efficient and competitive in areas linked to international trade, but productivity is far lower in protected areas such as agriculture, distribution, and services. Japan's reservoir of industrial leadership and technicians, well-educated and industrious work force, high savings and investment rates, and intensive promotion of industrial development and foreign trade produced a mature industrial economy. Japan has few natural resources, and trade helps it earn the foreign exchange needed to purchase raw materials for its economy

Overview

Japan has a history of struggling with deflation. The 1990s are often referred to as Japan's "lost decade" because of its 10-year struggle with falling prices. As a result, a stagnant Japanese economy dampened internal consumer and business demand, as well as significant investment in domestic electronics production capacity. As a consequence, Japanese production has grown at only half the rate of the total industry over the last ten years, and local production share is on a trajectory to decline to1980 levels over the next five to ten years

Over the past two years, Elecdyne has remained stagnant; the company had an initial success competing with price but is presently finding it increasingly difficult to compete given its need to pay for licenses, distribution of products is limited as supplies are within the Japanese market only, difficulty of hiring research graduates, and its high wage rates as relative to Eastern Europe and China,

In order to detect the pros and cons the company is undergoing, a SWOT analysis will be carried out. The analysis looks at internal factors, the strengths and weaknesses of the business, and external factors, the opportunities and threats facing the business. The SWOT analysis will give a clearer picture into the status of the company and the business environment wherein it is operating in at the present time.

STRENGTH:

-20 years experience in producing electronics

100 staff workforce

Possession of equipments needed fro production

Original Product variety

WEAKNESS:

Limited market(supplies only to Japanese market)

Poor financial position

Lack of resources

No growth in the last two years

Lack of innovation

No branding loyalty

5% cut down on price

Staff is less motivated

Unable to recruit R&D graduates

Lack of international operations

Low market share

OPPORTUNITIES:

Flexibility

High chance for innovation

Advances in technology and the ability to sell via the internet

New market opportunities could be a way to push elecdyne

Changes in technology could give elecdyne an opportunity to bolster future success.

Structural changes in the industry open other doors and opportunities for elecdyne.

THREATS:

Aggressive competitors

Increase in licence cost Increased competition from overseas is another threat to elecdyne as it could lead to lack of interest in their products/services. The actions of a competitor could be a major threat against elecdyne, for instance, if they bring in new technology or increase their workforce to meet demand. A slow economy or financial slowdown could have a major impact on elecdyne's business and profits. Lack of international operations. Rapidly changing market - Products become old very quickly. High cost of labour

POTENTIAL STRATEGIES FOR ELECDYNE

In order to compete in the electronics market, listed below are some strategies that can be useful to Elecdyne.

Reduce product range to a few Introduce the company to E-Business Company can move to an area of lower cost Source cheaper suppliers to reduce cost Develop marketing activity to promote their products Re-branding of products in order to boost company name Offer work placements for students in order to boost R&D

RECCOMENDATION

After proper and careful analysis of Elecdyne Electronics Company, inorder for the company to grow rapidly and remain in market, we the management hereby strongly recommend that the company be moved to another country preferably a country that is part of the TRIAD market, so as to gain access to more markets, deepening relations with the overseas economy.

Significance of Globalization

The World Bank defines globalization as the "freedom and ability of individuals and firms to initiate voluntary economic transactions with residents of other countries." Milanovic (2002). In this definition, "freedom" means the lack of barriers in the cross-border movement of capital and labour force, among other things, and "capacity" means that there is the ability to provide commodities and services across borders or to conduct economic activities in other countries. Looking back at the past, it appears that globalization advanced as technology and information-carrying capacity for transport, communications, finance, insurance and other aspects developed and political barriers to the movement of trade, capital and other items were removed. These developments boosted income levels, which in turn further deepened economic ties. Hence globalization is a trend that brings about economic development. (Boyacigiller, 1990; Harzing, 2001). In order to enjoy the benefits of globalization, it will be necessary to promote technological innovation in companies without delay and promptly adapt economic and social systems to respond to technological innovation, eliminate barriers and foster human resources that are able to carry out these changes. Heizo (2004)
Structural reform is important in Elecdyne's relations with overseas economies
Structural reform stimulates the domestic economy and is also important in the process of deriving benefits from globalization. In other words, the major objectives of structural reform are to ensure that the market mechanism fully functions, broadly enhance productivity and move labour and capital, among others, from low productivity areas to high productivity areas. This will also allow Elecdyne to reap benefits from closer economic ties with overseas economies. In business, the success of overseas operations has been attributed to several factors, such as good strategy, smart marketing, efficient production and excellent management.

Among them, effective expatriate management has been well documented (Mendenhall and Oddou, 1986; Dowling et al., 1999).
Despite the fact that the company has had no contact with overseas market, we the management of Elecdyne electronics have decided to deduce a strategy on going global focusing more on countries within the TRIAD market (which are Europe, North America and South East Asia). Hence we have come up with five possible countries that we could relocate to; taking into consideration two main issues- Access to technological expertise to avoid reliance on large multinationals, and cost minimisation.

These countries have been chosen based on some of the following reasons:

Advanced technology

Wide expanse of land

Favourable business environment

Low cost of raw materials and production

Highly skilled labour etc.

Analysis of the five countries using SWOT

COUNTRY 1:-GERMANY

It is the seventh largest country by area in Europe and the 63rd largest in the world. As Europe's largest economy and second most populous nation (after Russia), Germany shares borders with more European countries than any other country on the continent. Its neighbours are Denmark in the north, Poland and the Czech Republic in the east, Austria and Switzerland in the south, France and Luxembourg in the south-west and Belgium and the Netherlands in the north-west.

Therefore Germany would carefully be analysed using the SWOT analysis,

Strengths

Germany is the UK's number one European export market and number two world-wide

among the world's largest and most technologically advanced producers of iron, steel, chemicals, machinery, vehicles, machine tools, electronics

Market- Germany hosts the largest concentration of OEM plants in Europe

R&D- Germany is home to 42 percent of all European OEM and tier 0.5 supplier automotive R&D centers.

Has some of the world's best universities, these include: Technical University, Munich Germany University of Bonn, Germany etc

Important research institutions in Germany are the Max Planck society, the Helmholtz-Gemeinschaft and the Fraunhofer society. They are independently or externally connected to the university system and contribute to a considerable extent to the scientific output.

Weaknesses

The socialists are a strong force and there is labour union problem.



The wages are high which increases the costs.

Cultural differences

Complex business culture

Strict safety and packaging regulations

Opprtunities

A total of 15 billion euros made available by the Government for R&D projects in cutting edge technologies.

Easy access to other EU countries

- Highly developed E-commerce service

- High demand for electronic products

Threats

Threat from new emerging markets



Protection of environment and climate



Mounting pressure to reduce the CO2 emissions.

adjustment time for adapting the high German standards

- Stiff competition from local and global competitors

COUNTRY 2:- POLAND

Poland is the 9th largest country in Europe; it has a population of over 38million people, which makes it the 34th most populous country in the world and one of the most populous Union. Its natural resources include coal, sulphur, copper, natural gas, silver, lead, salt, arable land. Poland would carefully be analysed using the SWOT analysis,

Strengths

relatively low cost of labour,

favourable geographic location on transit routes,

large internal

Market (compared to other Central and Eastern Europe countries).

availability of highly qualified labour force

presence of universities, support of authorities, the largest market in central Europe, and possibly the lowest labour costs on the continent,

Member of the EU

Location between East and West

Long industrial tradition

Stable economy

Stable political system

Wide educational system

Biggest country of the EU members in the CEE

Diversified industry

Still attractive employment costs

Attractive tax system

Multinational companies such as: ABB, Delphi, GlaxoSmithKline, Google, Hewlett-Packard, IBM, Intel, LG Electronics, Microsoft, Motorola, Siemens and Samsung have set up research and development centres in Poland.

The Polish consumer electronics market

grew by 4.5% in 2005 to reach a value

of 938.5 million.

Weaknesses

EU Accession may drive cost of living higher
- Poor communication infrastructure
- Insufficient management culture
- Weak ability of domestic R&D institutes to cooperate with industry and make commercial use of scientific search results
- Shortage of financial instruments for SMEs and innovation development and low ability of entrepreneurs for self-financing of development investment
- Very high levels of unemployment

Poland imports much more in electronics goods

than it exports. The value of imports is more

than twice the value of electronics exports.

In 2005 Poland imported electronics goods

worth EUR 6,911.3 million. The growth rate

(over 2004) was almost 22.0%.

Opportunities

The strong inflow of FDI

in this sector in LCD screens, mobile phones, domestic audio and video equipment,

• India is changing rapidly and offers an attractive opportunity based on

market size (200 million middle class by the year 2000) and growth;

• The non-resident Indians estimated to number over 15 million have major

impact on the Indian economy, industrial policies and foreign

collaborations;

• India is poised to be a major industrial power by the turn of the century.

It is advantageous for American firms to position themselves as partners

in this fantastic growth.

• The business climate of India is improving (Naidu, 1984)

India is one of the largest recipients of foreign direct investment (FDI) in the world. In FY2004/05, India received $3.75 billion.

Weaknesses

Infrastructure that needs to be improved at the earliest possibility.

Easing of foreign investment procedures

Frequent power failures and shortages leading to disruptions

Opportunities

There is a strong 100 - 150 million middle class that

has considerable discretionary income making India an attractive market for

consumer goods.

Threats

A restructured government tariff that now makes domestically manufactured goods more expensive than imported goods with zero tariff

Import licensing regulations for non-high tech items remain a major

barrier.

UK companies are well positioned to take advantage of this growing export and investment market.

Indian policy does not favour the use of limited foreign exchange

for non-essential products.

COUNTRY 4:- TURKEY

Turkey is an emerging market with a population of around 72 million, 50% of which is under the age of 28. Turkey has the world's 13th largest urban population at about 50 million. It's the world's 15th and Europe's 6th largest economy. Turkey is also a springboard to the markets of Central Asia & the Middle East.

Turkey ispolitically stable,the government having been in office for nine years. Today, Turkey is investing significant sums in upgrading its infrastructure, including projects to build new dams, airports, roads and water and sewerage systems. Its recent, record economic growth, its talented, young workforce and its geographical location as a prime hub for regional market access makes Turkey a hugely attractive destination for trade and investment.

Strengths

National minimum (gross) wage, which is currently YTL 608 per month (approximately £ 260 per month)

Threats

The consumer market is now moving towards demand for LCD & Plasma TV creating a need for Turkish manufacturers to invest in new technologies

Aggressive competition from national MNEs. Arcelik & Beko (subsidiaries of KOC Holding): second-largest TV producer in Turkey. Has 15% approx. European market share. Beko has strong international reputation. Both have a wide product portfolio and their own technology & products using plasma, LCD, MEMS technologies. Both companies have purchased international acquisitions such as Grundig AG (Germany) “Home Intermedia System Division” (2004). Arcelik has also established a partnership with Ubicom (Silicone Valley, USA) and plans to integrate the Ubicom microcontroller solution into its projects where new technologies unique in their field have been used (“Smart” Appliances will be launched soon to consumer market).

COUNTRY 5:-CHINA

Strengths.

Huge consumer base. All the time being lifted out of poverty

Cheap production. Already 30,000 factories over there.

There are several free trade zones, 53 new high tech zones

In 2003 China supported 1,552 institutions of higher learning.

If Hong Kong is included it has immense technical expertise and language skills as well.

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